3 Alternatives to Investing in Residential Property in Singapore
24/05/2016 at 6:57 am #140
No matter what the government says, Singaporeans think of any residential property they purchase not just as a home but also as an investment, fuelled by success stories of the past 50 years, which have seen property prices increase in spectacular fashion.
However, residential property prices have actually fallen for the 7th consecutive quarter, and the cooling measures that kicked in over the last two years like the Additional Buyers’ Stamp Duty and the TDSR framework have cut lots of buyers out of the property market. So what’s an anxious investor to do? Here are some alternatives to investing in residential property in Singapore.
With the many restrictions governing the purchase of HDB property and ownership of multiple residential properties, many Singaporeans are excluded from the residential market altogether. Industrial property can be a good alternative, since the ABSD rules don’t apply here. Industrial property has to be used for activities the government classifies as industrial, such as manufacturing or warehousing.
The main hurdle is that most Singaporeans aren’t familiar with industrial projects and have no idea what rental yields are like. And let’s face it, it’s a lot more daunting trying to rent out a warehouse in Tuas than a condo unit.
Well, guess what? Rental yields for industrial property are actually significantly higher than those for residential property. However, it is worth noting that there are some restrictions designed to curb speculation. For instance, if you’re purchasing a unit in certain new developments, you’ll have to wait 10 years after TOP to subdivide it (subdivision lets you earn more in terms of rent as you’re parcelling out the property to multiple tenants). For strata-titled or multi-user developments, there’s a minimum size requirement, so forget about buying an itty-bitty space.
If you’d like to buy an office or shop space and rent it out to a business, you should be looking at purchasing commercial property. Like industrial property, commercial property investors have the advantage of not being affected by the ABSD rules. In general, commercial property is known to produce higher rental yields than residential property, but this is just a general rule, so do your research.
Commercial property can be quite badly affected by the fortunes of a particular area. A new shopping mall popping up in the area can cause rents in your own shop space to plummet, and the government can also decide to re-zone the area, which means that the restaurant premises you originally bought could morph into an office.
When investing in commercial property, you need to put yourself in the shoes of the business people who will be renting it from you. Think about whether the location is accessible and whether the unit sees a good flow of human traffic, and be wary of any new developments that are slated to appear in future.
We’ll be covering more on what you need to look out for in new commercial property developments in the future so stay tuned with us on Facebook.
While residential property in Singapore might still be expensive as hell even given the cooling measures, hop on a plane or across the causeway and everything suddenly starts looking a little more affordable. With currencies like the Malaysian Ringgit, the Thai Baht and the Australian Dollar at a low, the savvy investor can pick up quite a few deals if he knows where to look.
However, before jumping into an overseas property market, be wary of the fact that it can be risky, and many Singaporeans have been burnt. Work with a reliable agent and educate yourself on the property market in your area of choice.
You’re going to need to do a lot more legwork than you would when purchasing local property, so don’t try to turn a blind eye to the need to do your own research or assume that the agent will feed you with all the necessary information. Going with the hype surrounding a newly developed area without doing your due diligence is a common precursor to huge regret a few years later.
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